SIP Calculator

An SIP, or Systematic Investment Plan, is a method of investing money into mutual funds or stocks. It allows you to invest a fixed amount at regular intervals over time rather than making a large, one-time investment.

SIPs offer investors an easy, convenient way to invest without having to worry about timing the market. You can just set up an account and benefit from rupee-cost averaging over time.

The advantages of using an SIP return calculator are many. Some of them are discussed below:

1. Estimate required time and rate of return - Using this tool, you can estimate the rate of return required to reach your desired final amount. Additionally, you can also ascertain the time required for your investment to grow adequately.
2. Choose the right SIP – The SIP calculator can swiftly give you multiple variables with which you can assess an SIP scheme. You can use the calculator to compare multiple schemes as per those variables and choose the SIP that is best for you.

In order to use the Angel One SIP calculator, simply:

1. Enter the amount you want to invest monthly online SIP calculator.
2. Enter the duration for which you want to invest.
3. Enter the expected rate of return.

The calculator will instantly give you:

1. The total value of your investment after the duration.
2. The total invested amount.
3. The estimated returns from the investment.

The SIP returns are calculated by entering the variable numbers mentioned above into the SIP calculator. 

The SIP calculator formula used is,

A = P × ({([1 + r]^n) – 1} / r) × (1 + r)

Where,

A-> Estimated Returns from the SIP

P -> Amount you invest in SIP

r -> Rate of Return you are expecting to get

n -> Number of total SIPs made

Example of Using SIP Calculator

Suppose, you are a salaried individual earning a monthly income. Assume that you have decided to put in ₹5,000 per month as SIP and after due diligence, you have chosen an SIP that gives an average of 12% return per year. Now if you want to know the final amount this SIP will give you in 5 years:

1. Choose the ‘Investment Amount’ tab on the SIP calculator.
2. Enter ₹5,000 under ‘ENTER AMOUNT’.
3. Enter the expected rate of return as 12%.
4. Enter the duration as 5 years.

According to the calculator, if you pay a monthly SIP amount of ₹5,000 for 5 years at 12% rate of return, then the final amount you get will be ₹4,12,431.80, from the total invested amount of ₹3,00,000. If you are not satisfied with the end amount, you can decide whether to increase the investment period or find another SIP that gives a higher return.

Alternatively, you can also ascertain your SIP amount based on the target amount. Say that Mr. A wants to buy a car worth ₹5,00,000 in 2 years. He has identified an SIP that has given an average of 12% returns in a year. Here’s how he can use the calculator to get the estimated SIP amount:

1. Choose the ‘Target Amount’ tab on the Angel One SIP calculator.
2. Enter ₹5,00,000 in the target amount.
3. Enter the duration, i.e. 2 years.
4. Enter the expected rate of return from the SIP that you have chosen, e.g. 12% per year.
5. The SIP calculator will show that Mr A will have to invest ₹18,353 per month in the SIP in order to accumulate ₹5,00,000 at the end of 5 years to buy a car.

1. It helps you assess various SIP investment strategies based on the final amount, total invested amount and the expected return.
2. It is completely free to use, no matter how many times you use it.
3. It gives you instantaneous results that are accurate.
4. You can access it using any device that supports internet, from anywhere.

SIPs have become a popular method for building wealth in India, especially among the salaried middle class. This is especially true for mutual fund SIPs, as here, the retail investors can access the benefits of professional management of their investments, at a low cost.

Read the following types of SIPs to know which one is the best for you:

1. Regular SIPs

This is the standard SIP where investors pay a fixed amount periodically. They enable regular transfer of funds from the bank to the SIP account. It helps average out the cost of the SIP units purchased.

2. Flexible SIP

In this case, you can change the SIP amount as per your requirement. For instance, when the market is down and the assets are underpriced, you can buy more. Similarly, you can buy less when the assets are overpriced. 

You can also alter the installment amount according to your financial condition. You can lower the SIP amount when are short of cash and increase it when you have a cash surplus. This is also called Flexi-SIP or Flex-SIP.

3. Step-up SIP

Also known as Top-up SIP, this plan allows you to increase or step up the SIP amount at regular intervals. For example, you can start a monthly SIP with Rs. 10,000 and you arrange to increase it by Rs. 1,000 every year. This plan is suitable for salaried people who expect annual increments and bonuses. 

4. Perpetual SIP

You can stay invested in most SIPs for a pre-determined period of time. However, for perpetual SIPs, you have to only mention the start date and not the end date. This means that you are going to keep investing in the SIP until you request the fund house or the Asset Management Company (AMC) to stop the SIP. 

5. Trigger SIP

In this type of SIP, you can set a trigger for an SIP. The trigger could be an event, like a sudden market dip or a favourable market condition, a specific index level, a level of NAV (Net Asset Value), etc. Your trigger can result in starting the SIP, redeeming the fund units, or switching to another scheme. This is highly useful for people who invest based on principles and want to automate their investments.

6. Multi SIP

This scheme allows you to invest in multiple funds of a fund house via a single SIP. For example, if you invest ₹30,000 monthly in a multi-SIP, you can split the amount into 5 schemes, buying units of ₹6,000 in each. It makes investing in multiple SIPs a much smoother process and helps add to the diversity of your SIP portfolio. 

SIPs can also be categorised as per the kind of instruments that they invest in e.g. equity funds, debt funds, overnight funds, balanced funds, money market funds, etc.

An SIP can help you achieve financial independence at an earlier age provided you start investing at an early age. This is because:

1. The money invested in the SIP compounds over the years, generating a high return eventually.
2. Unlike investing in stocks yourself, you do not have to worry about investment strategies. The funds will be allotted by capable professionals who understand financial markets well.
3. You can garner high returns, without having to make a huge investment in one go. It is perfect for salaried people who get a moderate but regular income.
4. It encourages financial discipline as your SIP commitment nudges you to be more attentive toward your spending.
5. Investing in certain SIPs like ELSS funds can help you save thousands of rupees in taxes.

You can easily start an SIP on the Angel One app by taking the following steps:

1. Go to the Home page and click on ‘Mutual Funds’.
2. Choose the Fund that you want to invest in from the section titled ‘Discover Mutual Funds’. You can start your search by clicking on ‘EXPLORE ALL FUNDS’. You can also narrow down your search by clicking on the categories of fund given.
3. Once you have gone through the details of a fund and chosen it, click on ‘INVEST’.
4. Choose the SIP option and enter the monthly amount and date i.e. the day of the month when the SIP payments will be made from your account.
5. Choose the mode of payment e.g. UPI.
6. Click on ‘START SIP’ to start the SIP process.
7. You can choose to make your first SIP payment right away as well by checking the box next to ‘Make first SIP payment now’.

Whether to go for SIP or lump sum investment depends on your cash flow position. If you receive your income at indefinite intervals, then you should go for a lump sum investment. This is because the lump sum investment would earn a higher return compared to an SIP with the same total investment amount.

Taxation of SIPs in India is based on the following:

1. The holding period of the investment. For instance, gains from an equity fund held for more than 12 months are considered long-term capital gains and taxed accordingly. But gains from equity funds held for less than 12 months are considered short-term capital gains and taxed accordingly.
2. Tax-saving mutual funds (ELSS) are eligible for a tax deduction of up to ₹1.5 lakh in a financial year.

The following are some of the mistakes that should be avoided in SIP investments:

1. Procrastination - Delaying the start of SIP can reduce the potential benefits of compounding over time. 
2. Stopping SIP - You should not stop your SIP midway because SIPs give their highest returns towards the end of their holding period. Therefore, the short-term opportunity cost of leaving your SIP midway is quite high.
3. Ill-informed selection of funds - Choosing a fund without adequate research may lead you to invest in an SIP that is not in line with your goals. It's essential to research and choose SIPs based on investment goals, risk tolerance, and historical performance.
4. Excessive investing - Investing beyond one's means can lead to financial strain. Setting a realistic and affordable SIP amount ensures consistency in contributions.

You can use the SIP calculator to calculate the expected returns from various mutual fund SIP schemes. Once you have adequate data, analyse it to choose the one that works best for you.